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After six consecutive cuts, the Reserve Bank has paused the Official Cash Rate at 3.25%, with the next update due on 20 August. While fixed home loan rates remain tightly clustered—especially across 1–3 year terms—floating rates show more variation, and the market outlook suggests we’re nearing the bottom of the interest rate cycle. In this post, I’ll break down the current lending landscape, share my personal strategy, and offer practical guidance to help you choose the right loan structure for your situation.
After six consecutive cuts, the Reserve Bank held the Official Cash Rate (OCR) at 3.25% in its most recent announcement. The next update is due on 20 August, and the general consensus is that we might see one—possibly two—more reductions this year.
As of 14 July 2025, competitive fixed home loan rates (assuming 20% equity/deposit) are:
There’s very little difference between the 1–3 year fixed rates across all banks. However, floating rates vary more widely—from around 5.75% up to 6.5%. Some banks clearly aren’t trying to compete in the floating space, and they probably don’t need to.
The gap between short-term fixed rates is so narrow that, for most people, it’s not a major factor. I’m not seeing many borrowers locking in for more than three years, though there are still valid reasons to consider it.
If you’re not simply picking the lowest rate between 1–3 years, then what’s guiding your decision?
Try to align with the broader market outlook. While no one can perfectly time the bottom or top of a cycle, most agree we’re nearing the bottom of this interest rate cycle—but we’re not quite there yet. (And no, I don’t think we’ll see rates in the 2–3% range again… but then again, no one saw COVID coming either.)
Any further drops from here are likely to be small and gradual—dependent on inflation, economic recovery, and other factors. At some point, locking in a 3-year rate in the 4s will look like a smart move.
Personally, I’m fixing for one year—hoping that in 12 months, longer-term rates will still be in the 4s. But for those who don’t want to take that risk, fixing for longer now—or splitting the loan across terms—might be the better call.
Fixing your entire loan for three years or more reduces flexibility. If you need to make changes—sell your home, restructure, make lump sum payments—you could face break fees. So, think carefully about whether your situation is likely to change in the next few years.
Splitting your loan across terms can help hedge against rising rates—but it also means you won’t benefit as much if rates fall. You can’t have it both ways.
If your loans are split across different terms, it can make switching banks harder. Many banks offer cash incentives when you take out a loan, but these are repayable if you move within three years (or four, in some cases). After that, you might be eligible for a new cash offer elsewhere—but only if your loans aren’t locked in.
There’s no one-size-fits-all answer here. The right move depends on your goals, risk tolerance, and future plans. That’s where a good adviser comes in. We can’t predict the bottom of the cycle, but we can help you navigate the options with some solid market insight behind us.
Brendon.
Brendon Ojala (FSP119244) is a Financial Adviser with Velocity Financial (FSP95466). No investment decision should be taken based on the information in this blog alone. Please see our disclosure statement on our website.
About Brendon:
Hi, I'm Brendon, one of the owners and advisers at Velocity Financial. I have been giving advice on mortgages and insurances at Velocity for around 15 years, and it is great to be able to work with people to achieve their financial goals. Prior to giving money advice, I worked as a youth worker and managed teams for a not-for-profit organisation. I live with my wife and one of my sons (the other one only stays when he needs food) in Berhampore, and if I'm not talking revolving credit accounts, I can be found running the trails of Wellington.
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